Goldman Sachs: Time To Buy Enviva Partners LP

In a report published Tuesday, Goldman Sachs analysts initiated coverage of Enviva Partners LP EVA with a Buy rating and price target of $25.

The analysts believe that the stock offers an attractive investment option, "given its leverage to rapidly growing wood pellet demand, its low cost asset base, a favorable contract structure, a strong dropdown pipeline and distribution/unit growth, and compelling valuation relative to its closest comparison set."

The company is well positioned to leverage the continuing growth in wood pellet demand. This demand is being driven by major utilizes that are converting their traditional power or heat plants to burning wood pellets in an attempt to meet the EU 2020 renewable energy goals. This is especially true in key European countries, such as the UK, Netherlands, Denmark and Belgium.

The analysts also expect that "EVA's sponsors will drop down six additional plants through 2019 given favorable wood pellet fundamentals," while also expecting the company to witness distribution growth at a robust 17 percent CAGR through 2018, "driven by a robust dropdown pipeline and cost execution."